Austrian Economics in the Middle East, and the Benefits of Monarchies

Austrian Economics in the Middle East, and the Benefits of Monarchies

(Image: The Strait of Hormuz)

There is no better way to understanding the destructive distortions governments around the world cause in their economies (and elsewhere) than through Austrian economics.

In case you don’t know, Austrian economics is based on the analysis of the purposeful actions of individuals; it advocates property rights, the free market, and sound money while opposing taxes, price controls, capital controls, and other destructive government interventions in the economy.

Ludwig von Mises claimed that the first job of an economist is to tell governments what they cannot do.

Austrian economics contrasts sharply with mainstream Keynesian economics—the type of economics taught in public schools. Being essentially a state-sponsored school of thought, it is no wonder that Keynesian economics seeks to justify destructive government meddling in the economy.

It is also no surprise that Ron Paul chose Austrian economics.

Austrian economics is very relevant to international diversification. It gives us the intellectual tools to better understand the distortions a desperate government can cause… and how to better position our investments and ourselves as a result.

This is why I am very glad to bring to you this discussion between Lew Rockwell and Yousif Almoayyed.

Lew, as many of you know, has done an immeasurable service to free-market thinking by founding the Ludwig von Mises Institute, which is the vanguard of the Austrian school of economics and a veritable treasure trove of free information.

Yousif is a businessman in Bahrain and an adherent of the Austrian school.

You’ll find their informative and entertaining discussion below.

Until next time,

Nick Giambruno
Senior Editor

Lew Rockwell: This is The Lew Rockwell Show and how great to have as our guest from Bahrain, Yousif Almoayyed.

Yousif is a successful young businessman in Bahrain. He’s the director of the National Concrete Company. He is an avid student of Austrian Economics, and of noninterventionism.

In fact, he told me that when he was a student in China where he studied electronics and telecommunications for six years—and he, by the way, is a fluent speaker of Mandarin Chinese—that it was seeing the role of the Chinese state and the economy there, that made him into a noninterventionist.

When you and your wife were observers at the Mises University, I was very struck in one of Judge Napolitano’s classes where he was asking the non-American students there if they still think of America as a place to emigrate to, or were they concerned about that it was becoming much less free than their own countries.

And you said, “I would never think of emigrating to the United States. We don’t have any taxes here in Bahrain.”

And then you told a wonderful story about some people from a government entity in Bahrain seeking to find out from you where you kept your personal money—is it overseas? Is it at home? and so forth. And you told them, “No thanks, I don’t want to tell you that information.” So a very different situation from the US, but tell us, what’s it like to do business in Bahrain?

Yousif Almoayyed: There are lots of things I learned from the Mises Institute, and it’s made me aware of a lot of things. It’s made me more aware of my history and the history of the region around me in the Middle East, the factors which in the past led to this region thriving and what led to its decline.

In the class when Judge Napolitano asked if young people thought they would like to move to the US, I told him definitely no, because back home we feel a lot more free than we feel in the US, especially in terms of your finances.

I know in the US that they emphasize freedom of speech, personal freedom, but in terms of your finances, you are very not free. When an American citizen lives overseas, they still have to pay taxes. There are just a few countries that do that. It is not a common thing for you to be taxed when you leave your country.

Lew: Of course that’s absolutely true. If you leave the US and you move to, say, France, you’re earning an income in France, the US wants a piece of that. So as you say this is a very unusual, tyrannical, of course, practice in the world.

I fear that it might become more frequent, as the world seems to be following the US into a more totalitarian and Keynesian direction, but at least so far, it’s not. I mean, most countries are much more civilized about taxes and don’t do that.

Yousif: Well, I think because most American citizens never leave their country, they’re not aware of this.

Lew: It’s true that Americans are so unbelievably provincial. I sometimes think that maybe that’s always been the case with empires. I don’t imagine that the average Roman cared much about what the Gauls thought. Maybe that’s just another argument against empire.

Before we go on, you mentioned that there are no income taxes, no corporate income taxes, no inheritance taxes, and so forth in Bahrain.

Yousif: I’ll tell you with the region which I am familiar with, which is the Gulf region, the region that produces oil. It’s very interesting because you have two economies. You have an economy that’s completely controlled by the government, and you have a completely private economy which has no taxes. You have no personal income tax. You have no corporate tax. We don’t have inheritance tax; but we do have import taxes, but they are very low. They are maybe 5% or lower, and there is some trade restriction with the countries nearby, so we’re not completely a free-trade zone.

A neighboring country with us is the United Arab Emirates, where Dubai is located. They are the freest market in the region. That brings in a lot of money from the rest of the world, from India, Pakistan, Iran, the wider Gulf Region, everywhere. All trade is going through there now. That’s the trend here, and unfortunately before, Bahrain used to be in this position, and it no longer holds this position. It is losing to Dubai.

Lew: In one of Hans Hermann Hoppe’s great books on democracy, The God That Failed, he talks about why, in fact, monarchs have a much harder time taxing than democracies.

Yousif: I read that book. How things work here with the monarchies is there is a consensus among the ruling tribe. They rule by consensus, but there is a way of letting your opinion reach them and you can share opinions. There is a system here, and it is quite stable.

I would prefer to live under a stable system than a system that has people that have never been in power and then suddenly they are in power, and then they want to direct the government to do different policies in their favor for their interest group, as happens in a democracy.

Lew: As Hans points out in his book, a monarch wants to improve and preserve the kingdom for his descendants, whereas a democratic politician has every incentive to rip off everything during his limited term of office. He doesn’t care about the future. He doesn’t care about what happens to the country in the future. He just wants his take. So that’s why monarchs don’t rip off their own people. They don’t have the incentive to do it because they want to preserve their rule for their children and their grandchildren and far into the future.

Lew: This is probably a result of colonialism, but a lot of people identify Islam with socialism, but there really is no reason to do that, is there?

Yousif: That is true, and a lot of modern socialists looked at Islam and took a socialist interpretation of it. And there are some figures who showed socialist tendencies, but when it comes to the Prophet Mohammed, he was a businessman, and he had no problem with private property, with commerce, and he has some very nice things to say about businessmen.

Lew: Are you optimistic about the future of the Gulf region? You’ve done a lot to help spread interest in free-market ideas and Austrian economics in that area. How are things going from the standpoint of spreading the ideas of liberty?

Yousif: Well, it’s a very slow process, and the first thing I’m doing is trying to translate books into Arabic and just put the literature out there. But it’s a very slow process. For me, a lot of the insights of Austrian economics helped me with my business to be able to analyze and diagnose problems and improve things.

In terms of Bahrain overall, unfortunately the government is trying to use the force of the law to increase wages, increase the minimum wage. I don’t see it working. They also imposed a head tax on every foreign worker which is paid by the company. The money goes to training local people. So it’s a kind of a taxation. But it’s very little, like $10 per worker per month.

Lew: Still not a good thing.

Well, Yousif, you are already a leader in business and free-market thought in Bahrain, and I think you are going to become a much more prominent leader in the future, and it’s wonderful when you come here to visit the Mises Institute. Keep doing what you are doing, and thanks for coming on the show today.

Yousif: Thank you very much, Lew; it’s always a pleasure. I can’t thank you enough. Your institute is what gave me a real education. It gave me the tools to educate myself.

Tags: bahrain, austrian economics,